The 1.59 million TEU capacity contracted so far in 2024 is the third highest since 2008. In combination with the 8.86 million TEU contracted in 2021-2023, well over 10 million TEU has now been contracted, reveals BIMCO in its latest Shipping number of the week.
2024 container ship contracting is only exceeded by the first seven months of 2021 and 2022. The previous four-year contracting record of 8.31 million TEU (2004-2007) has already been surpassed by far.
‘When only six ships with a capacity of 4746 TEU were contracted in the fourth quarter of 2023, many might have thought that the container ship contracting spree that began in 2021 had finally cooled. However, the appetite for new ships remains high and year-to-date contracting already exceeds the 2023 full year total. That brings the total capacity contracted since the start of 2021 to 10.47 million TEU,’ says Niels Rasmussen, chief shipping analyst at BIMCO.
Also read: BIMCO: Newbuilding prices to highest level in 16 years
Ship recycling activity low
Compared to the size of the fleet at the beginning of 2021, the capacity contracted since then will add 44 per cent new capacity. Actual fleet growth will, however, depend on how many ships are recycled.
‘Ship recycling activity has been very low since 2021 and the 3.88 million TEU contracted and delivered since then has – along with capacity contracted before 2021 – already contributed to a 25 per cent expansion of the fleet since January 2021,’ says Rasmussen.
Since only 150 ships (0.24 million TEU) have been recycled since 2021, the many new ships delivered have not been enough to keep the average age of the fleet in check. The average age of container ships has increased from 13.0 years at the beginning of 2021 to 13.9 years today.
In the coming years, recycling could increase significantly and partly or fully retire the ten per cent of capacity and twenty per cent of ships that are currently over twenty years old. However, the current order book/fleet ratio is 22 per cent and even more ships could be contracted and delivered before the older ships have been recycled.
Also read: BIMCO: Charter owners’ share of fleet has fallen to 40%
Red Sea crisis increased demand for ships
Although freight rates and time charter rates suffered a setback during 2023 because market growth could not keep pace with fleet growth, the Red Sea crisis has lengthened voyages and increased demand for ships this year. In fact, had the fleet not grown substantially before the Red Sea crisis began, it could have developed into a major supply chain crisis.
‘The fleet is expected to grow at least twelve per cent before the end of the decade, equal to an average annual growth rate of 2.4 per cent. Although cargo volume growth might match that pace, we could see pronounced oversupply if fleet growth ends higher and the Red Sea crisis ends, lowering ship demand significantly,’ says Rasmussen.
Also read: Container ship deliveries hit new YTD record of 1m TEU
